As Tesla Motors and SpaceX nearly disappeared in 2008

At the end of 2008, two companies Ilona Mask, Tesla Motors and SpaceX, spent several days on the edge of the abyss. Both projects desperately needed new investments, and the management had no clear plans for obtaining them. The founder himself was on the verge of a nervous breakdown - the year turned out to be too tense even for such an extraordinary person as Musk.

The miracle happened, as is customary, at the very last moment. Why did investors again believe in Tesla and how did NASA “suddenly” offer SpaceX a very lucrative contract at that very moment? Who knows, this is probably a Christmas tale about how in three days Tesla Motors and SpaceX escaped from bankruptcy and received the necessary money.

About Ilona Mask and his projects are arguing. Opposite points of view begin with a high degree of praising grand ideas and end with attempts to convict the inventor of cheating customers, and unreasonable waste of savings of investors and buyers.
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Urgent need recharge

Here is what Ashley Vance writes about the 2008 year in a book about the history of Ilona Mask:

“By 2008, the company began to run out of money.
The development of the Roadster cost $ 140 million — substantially more than the $ 25 million that was put in the 2004 business plan. Under normal circumstances, Tesla could probably get additional funding. However, market realities were far from normal. Major American automakers were approaching bankruptcy in the midst of the worst financial crisis since the Great Depression. In the midst of this chaos, the Mask needed to convince Tesla investors to part with tens of millions of dollars. Investors also had to provide their clients with evidence of the appropriateness of these investments. As Musk himself said: “Here you are trying to justify the financing of the development of electric vehicles, and in the meantime the industry publications are literally shouting that this manufacturer makes bullshit, the company is doomed, nobody buys cars in the yard,” he said. To get Tesla out of this mess, it took Mask to sacrifice his whole fortune and find himself on the verge of a nervous breakdown. ”

In 2008, there were no streams of articles on the situation of companies in the media, and Musk apparently behaved in such a way that even Richard Branson, who spoke with him during the crisis, was surprised by his apparent calmness and his hair was not gray-haired. And in fact, Musk really was afraid of failure. Especially after the mastodons of the auto industry Chrysler and General Motors declared bankruptcy. More facts were made public later, in 2013-2014, - there were confessions in an interview. Tesla fought the financial crisis like other manufacturers. When the company needed money for Model S, Ilon Musk decided that it was better to go bankrupt himself. He gave his personal last 35 million companies. During the crisis of 2008, Tesla Motors was still a private startup. It became public later.

Mask, of course, genius. But Tesla was not ready for mass production, and there is still a new concept. What did he count on? At the end of October 2008, the media wrote about a new protracted round in the process of financing the company. And although the company was shaken, like many others at that time, from the crisis of 2008, Musk himself believed and promised to everyone that all 1200 pre-ordered electric cars would be delivered to their owners. The company seemed to consolidate after the closure of the Detroit office and the dismissal of 90% of its employees.



Reporters learned that the company is considering options for attracting investment. On October 31, the company expected revenues of 20 million from existing investors during the week in addition to the 9 million available in the account. This was known from the words of the founder , said in a conversation with Reuters. Ilon Mask promised to personally verify that the company will have enough money to release all custom roadsters. He also added that he has every reason to say so that the future owners of the electric vehicle would reject the excitement about their deposits.

Tesla has delivered less than 60 roadsters, even though it took 1,200 orders. People made deposits in the amount of from 5 to 60 thousand dollars for orders under the contract with the condition that this money can be used as working capital of the company. And after that, Tesla's position became unsustainable due to the confusion in the financial markets, rising prices for cars and constant production delays. When Tesla failed to protect one hundred million investment, Musk reduced the company's workforce by 24% and postponed the development of the battery-powered electric sedan Model S. Assembled, at the exit of the plant, it had to cost 60 thousand dollars. He also accepted the CEO post from former colleague Ziva Drori .

Why do people pre-order

“A month after the presentation in Santa Monica, the famous exotic car show Pebble Beach Concours d'Elegance was held . Tesla has become such a popular topic of conversation that the event organizers simply begged to bring Roadster to the exhibition and canceled all participation fees for the company. Dozens of visitors at the Tesla stand wrote checks for $ 100,000 to pre-order the car. “It was a long time before the Kickstarter crowdfunding platform, we didn’t think about anything like that,” says Tarpenning. “But then we started getting millions of dollars at such events.”

Venture funds, celebrities and friends of Tesla employees began to buy places on the waiting list. The matter has gone so far that individual members of the Silicon Valley elite personally came to the Tesla office to buy a car. Once the company was visited by businessmen Konstantin Othmer and Bruce Leek, who knew Mask from his internships at Rocket Science Games. For the honored guests, Musk and Eberhard had a personal tour that lasted more than two hours. “In the end, we said: OK, we take it,” says Othmer. - At the time, Tesla was not yet allowed to sell cars, so we joined their club. Membership cost $ 100,000 and promised a free car. ”

Ashley Vance, “Ilon Musk. Tesla, SpaceX and the road to the future "

Behind two hares: besides Tesla there was also SpaceX

Before the fateful Christmas of 2008, the company underwent three failed launches, which virtually crippled the company. With everything at stake, Mask made the final attempt. At the end of September 2008, the Falcon 1 rocket was launched for the fourth time and successfully delivered the payload model to orbit. About this moment Mask said: “We have smoke coming out of our ears. At that time, we actually had no money and the fourth failure would have been the absolute end of the game for the company. ” But even taking into account, finally, a successful launch, Musk found himself in the center of the ruins of the financial collapse on that memorable Sunday before Christmas. One might have thought that all this is clearly "signs." After all, every time something went wrong. Perhaps if the fourth time there was a failure, there would be no continuation. But it would be contrary to the conviction of Ilona Musk to follow her dream at any cost. And fortunately, Muskom made a sensational contract with NASA - in the amount of $ 1.6 billion. Under the terms of the deal, SpaceX was to carry out 12 flights to the international space station. The contract put an end to disputes over whether space travel could be cheaper and whether a commercial organization could compete with NASA.

Ilon said that 2008 was the worst year in his life. The Falcon 1 rocket crashed in August, and Tesla, who shot at a huge speed in the Roadster model, “ate” a huge pile of money. Musk said that the costs of both SpaceX and Tesla companies amounted to $ 180 million, which were previously obtained from selling its stake in PayPal in 2002. To the problems "at work" added changes in family life. That year the divorce proceedings were going on and he had almost no personal money left.

In all this difficult situation, Mask really needed investor money - all for the sake of Tesla being produced further. Plus, the popular gear "Top Gear" allegedly slandered the new Tesla model. Things were really very, very bad.

I remember how I woke up on Sunday on Christmas Eve of 2008 and thought, “my friend, I never thought that I would be someone who might have a nervous breakdown.” I was on the verge, and the surrounding seemed bleak.

Great gift for an adult boy

On December 23, 2008, NASA presented SpaceX with a $ 1.6 billion contract, so that at least 20 metric tons of cargo were delivered to the international space station during 12 scheduled flights. Later in an interview, Musk admitted that he was so pleased with the call from NASA that his answer was very emotional. This saved SpaceX. Two days later, in the evening before Christmas, Tesla's investors decided to invest more money. Wonderful story, isn't it?

At the moment of sincere human vulnerability, Musk could only say "I love you guys." In just three days, Musk went from great sorrow and risk to great joy and was rewarded. He was not just lucky, he lost his way, thinking only about making a dream come true, and not its economic justification. In an interview with Scott Pelli, Musk said: “In fact, I did not believe that Tesla would be successful. I thought that most likely we will break up. But I was convinced that we should at least try to correct the conviction of people that an electric car should be ugly, slow and boring like a golf car. If something is important enough for you, you should try even if the more likely outcome is failure. ”



Since that time, rockets have behaved perfectly. The cargo rocket capsule docked three times with the space station, and at the plant in California they are always ready for the fact that they will have to help complete future missions. However, the words “bankruptcy” and “Tesla” were used in one sentence later, in 2010, in 2013 , and now in 2016.

In 2014, in an interview with the journalists “60 minutes”, Musk spoke about his way of thinking and the difficulties on his way. The moral of his story is most likely to be prepared to risk everything for what you believe. However, what would have happened if the situation had been resolved differently?
The founder was faced with a choice between two points: divide the remaining capital between the two companies or concentrate all the resources in one of them. That's just what. And he decided to share the money and keep going after both dreams. The risk was enormous and almost catastrophic. But thanks to coincidence, capital has exceeded $ 20 million. If this money did not appear, the company would soon go bankrupt. Even with such luck, Musk still doubted SpaceX.

Non-performing investments

In economics, there is such a thing as bad investments . This is an investment that never return. The more such expenses the project undergoes, the more they invest in it in the hope of returning everything at once “at least this time”. This spiral tightens its infinity. Sometimes it is difficult for people to stop and honestly say to themselves: “Everything, I will not return anything, and this is true, the best thing you can do is quit or work honestly without waiting for profit”. It is possible that this is known from the very beginning, but the idea is so steep that it is really impossible to give up the desire to realize it. And then the founders are immersed in an exciting process for the sake of the process and technical implementation, it is a pity that investors and Santa Claus are different characters.

In a similar position was the French-British aviation project "Concord". The plane was revolutionary: it flew twice as fast as previous passenger aircraft. And the costs for it were just as impressive, it contained too few passengers to pay off, and there were few orders. And yet, it continued to develop - Concord brought losses to owners for more than 40 years. When the documents of the Cabinet of Ministers of Britain were published, everyone understood that the government of the United Kingdom knew about the weakness of the business case. The result was about a billion dollars of non-refundable costs.